Women, with Weaker Credit, Outdo Men When It Comes to Paying a Mortgage

Female single mortgage borrowers default less on their loans than male single borrowers, despite having weaker credit, a recently released report by the Urban Institute reveals. The results of the report’s analysis show the percentage of female single borrowers who are 90 or more days delinquent is lower than that of male single borrowers—evidence that lesser credit profiles do not predicate lesser loan performance.

“Single women with mortgages are doing a better job of paying their mortgages than their credit characteristics predict,” the report’s authors state. “Because the higher price they pay for their mortgages is based on their credit characteristics when they take out the loan, this means single women borrowers are paying too much for their mortgages.”

Their conclusion is drawn from a number of findings, derived from data obtained through CoreLogic and the Home Mortgage Disclosure Act (HMDA):

Single borrowers, female and male, have lower credit scores than borrowers/co-borrowers. Between 2011 and 2014, the average FICO for a male single borrower was 739; for a female single borrower, 741. This compares to 744 for female/male borrowers and 748 for male/female borrowers. (It is important to note the analysis included data for female/female and male/male borrowers, though these were not explored in depth due to their relatively small representation.)
Single borrowers have lower incomes overall, but those of females register below those of males. From 2011 to 2014, the average income of a female single borrower was $70,200, compared to the average income of a male single borrower, $97,700. (The average incomes in that same period of a female borrower/male co-borrower and male borrower/female co-borrower were $121,300 and $129,800, respectively.)

Female single borrowers are subject to higher interest rates: 4.01 percent on loans originated in 2011 to 2014, more than the 3.99 percent for a male single borrower, the 3.97 percent for female/male borrowers, and the 3.94 percent for male/female borrowers.
Loan amounts skew lower for female single borrowers—an average $171,200 for loans originated between 2011 and 2014. The average loan amount for a male single borrower in that same period was $204,900; the average loan amount for female/male borrowers was $218,200; the average loan amount for male/female borrowers was $234,200.
Female single borrowers fall behind when weighing loan amount against income. From 2011 to 2014, a female single borrower had a 2.9 percent loan size-to-income ratio, compared to 2.6 percent for a male single borrower, 2.2 percent for male/female borrowers and 2.1 percent for female/male borrowers.

In short, female single borrowers have less substantial mortgages taking upmore of their budget. According to the results of the report, 15.6 percent of female single borrowers have higher-priced mortgages—15 percent of male single borrowers, 12.6 percent of female/male borrowers, and 7.6 percent of male/female borrowers, by contrast.

The report emphasizes female single borrowers are also denied mortgages more than their counterparts, and are more likely to be minorities living in low-income areas where more than half of residents are minorities.

All of these findings bring to stark relief the need for alternative credit risk assessment methods. The current lending landscape, according to the report’s authors, shuts single women—particularly low-income, minority women—out of means to homeownership, though they have demonstrated otherwise.

“This omission has real consequences,” the report’s authors state. “Women are generally denied for mortgages more often despite their superior payment performance…we need to develop more robust and accurate measures of risk to ensure that we aren’t denying mortgages to women who are fully able to make good on their payments.”

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